More on Public Sector Austerity in Canada

A short addendum to my previous post:

I checked the most recent IMF projections in the June, 2011 Update to the Fiscal Monitor.

Table 1 provides estimates of changes in the general government government cyclically adjusted balance in percent of potential GDP. Basically changes are the result of discretionary changes in fiscal policy rather than due to improvement or deterioration of the economy.

The Canadian balance is forecast to fall from a peak of -4.0% in 2010 to -2.9%  in 2011 to -2.2% in 2012 – a decline of 1.8 percentage points since stimulus measures came to an end. The report notes that provincial spending has been cut by more than anticipated.

The balance for all advanced economies is forecast to fall from the peak of -5.6% in 2010 to -5.1% in 2011 to -4.2% in 2012 – a decline of 1.4 percentage points.

The Euro area balance is forecast to fall by 1.7 percentage points 2010 to 2012, and the US balance is forecast to fall  by 1.4 percentage points over the same two year period.

So, our dose of austerity is a bit more stringent than the norm for the advanced economies, even though our debt  situation is much better than the average.

The Table does show that, among the G8 countries  for which estimates are provided, fiscal austerity is most stringent in Spain (-3.4 percentage points) and the UK (-2.9 percentage points 2010-2012)



  • Off topic, but this article on Switzerland is interesting. It’s about the problems caused currency value increases due to their lack of irresponsibility, not unlike the problems Canada is having with our dollar. One difference is that their government and central bank actually cares and is trying to do something about it.

  • What was the title of this post? “Moron public sector austerity in Canada”?
    I find it hard to argue with that.

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